Swift, UBS Asset Management, and Chainlink have announced the successful completion of the pilot for connecting tokenized assets with a regular payment system. This is a major breakthrough for adopting blockchain in traditional finance. This effort, undertaken under Project Guardian of the Monetary Authority of Singapore, shows that tokenization with blockchain technology with Swift’s already existing networks could be the way forward in terms of efficient handling of asset management.
Addressing Inefficiencies in Fund Operations
Current subscriptions and redemptions in mutual funds require mutual interventions, long settlement periods, and less clarity, thereby incurring higher costs and missed opportunities in the $63 trillion global mutual fund industry. This pilot sought to mitigate these perceived challenges by demonstrating how tokenized fund transactions could be achieved through blockchain in real-time and automatically.
The series of projects, under the framework of Chainlink’s Cross-Chain Interoperability Protocol (CCIP) and coupled with the security payment network of Swift, enables the institutions to settle the subscription and redemption of tokenized assets without needing on-chain payment options. Financial institutions can optimize their operations, adding efficiency to their standing payment systems without undergoing a complete overhaul to enable faster, more automated settlement with less operational overheads.
Integrating Blockchain and Traditional Payment Systems Using Swift
The pilot is based on prior work done by UBS Asset Management and SBI Digital Markets to develop a Digital Subscription and Redemption system for tokenized assets. The project applied Swift’s infrastructure to clear transactions with the help of Chainlink’s CCIP for effective integration between the blockchain and the existing Swift system. This combination allowed for the minting and burning of tokens based on the investor’s activity, which shows that the blockchain platform can manage the lifecycle of digital assets in a traditional financial setting.
Enabling Secure, Scalable Digital Transactions
In an interview, Jonathan Ehrenfeld, Swift’s Head of Strategy, stressed that the pilot covers the main idea of developing Swift’s vision of conducting safe and efficient transactions utilizing digital and fiat assets. He pointed out that the ability of digital assets to connect to Swift’s network may enable the firm’s 11,500 financial institution members across the globe to consider blockchain advantages without switching to an innovative on-chain payment system.
According to Chainlink’s co-founder, Sergey Nazarov, the collaboration has been described as a significant step that will allow institutions to utilize Swift’s ‘rails’ for off-chain activities in the context of digital assets. This setup not only makes digital assets more accessible but also mobilize new funds toward tokenized assets as their adoption expands.
The success of this pilot is a good sign for the future of the tokenized assets, and it might improve the liquidity and efficiency of the markets worldwide.
